Assessing Sable Offshore After Gulf of Mexico Project Approval and a 43% Weekly Drop

• Wondering if Sable Offshore is a bargain or a value trap? You are not alone, especially as investors question whether it is nearing the bottom or primed for a turnaround.
• The stock has been on a wild ride, dropping 43.4% this week and down nearly 69% year-to-date. This indicates that market sentiment has shifted dramatically in a short period.
• Sable Offshore recently made headlines for securing new project approvals in the Gulf of Mexico and announcing an operational update on its flagship deepwater field. These events have injected both optimism and uncertainty into the stock’s outlook, which helps explain some of its recent price swings.
• On our 6-point value check, Sable Offshore scores a 3 out of 6 for being undervalued. This suggests there might be untapped opportunity, but also room for caution. Up next, we will break down these valuation approaches and hint at a smarter way to make sense of Sable’s true value by the end of the article.

Find out why Sable Offshore's -68.2% return over the last year is lagging behind its peers.

Approach 1: Sable Offshore Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them to today's dollars. This approach helps investors understand what Sable Offshore could truly be worth based on its ability to generate cash over time.

Starting with Sable Offshore’s most recent Free Cash Flow, the company reported negative cash flow of $473.20 million. However, projections show significant improvement ahead, with analysts estimating Free Cash Flow of $279 million in 2026. Over the next decade, extending these forecasts paints a promising growth trend, with discounted projections reaching nearly $1.24 billion by 2035.

Based on the 2 Stage Free Cash Flow to Equity model, the DCF analysis assigns Sable Offshore an intrinsic value of $170.46 per share. At current prices, this figure suggests the stock is trading at a significant 95.7% discount to its estimated fair value. In short, the numbers point to Sable Offshore being deeply undervalued, indicating the market may be overlooking substantial future potential.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Sable Offshore is undervalued by 95.7%. Track this in your watchlist or portfolio, or discover 841 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Sable Offshore.

Approach 2: Sable Offshore Price vs Book

For companies like Sable Offshore, the Price-to-Book (P/B) ratio is a popular way to judge valuation, especially in capital-intensive industries such as oil and gas where tangible assets and balance sheet strength matter. The P/B ratio compares a company’s market value to its book value, giving investors a sense of how much they are paying for each dollar of net assets.

Growth expectations and perceived risk both influence how high or low a company’s “normal” P/B ratio should be. Fast-growing companies or those with strong profitability may warrant a higher multiple. In contrast, higher risk or stagnant growth could push the ratio lower. It is important to weigh these factors when considering whether a specific P/B is justified.

Currently, Sable Offshore trades at a P/B ratio of 1.62x. This sits above the industry average of 1.31x for Oil and Gas peers, indicating the market is giving Sable a premium compared to the broader sector. However, simple comparisons can be misleading if they do not adjust for company-specific factors such as growth prospects, risk, and profit margins.

This is where Simply Wall St’s “Fair Ratio” comes in. Unlike basic benchmarks, the Fair Ratio is tailored to account for Sable Offshore’s unique profile, including its earnings growth, risk exposure, profitability, industry, and market cap. It aims to reflect what would truly be a reasonable multiple for this company at this point, offering a more holistic view of valuation.

With Sable’s actual P/B at 1.62x and the Fair Ratio currently unavailable, there is some uncertainty about where the shares stand relative to their intrinsic worth. Without this key metric, it is harder to make a definitive call. Using industry and peer comparisons alone suggests Sable might be modestly overvalued or about right, pending a more nuanced fair value calculation.

Result: ABOUT RIGHT

PB ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1411 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Sable Offshore Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is simply your story or perspective about a company, combining your view of Sable Offshore’s future with your own forecasts for its revenue, earnings, and profit margins. This approach connects the dots from the company’s story to its financial forecast, and finally to what you believe is a fair value for the stock.

Narratives make investment decisions more personal and dynamic, and they are easily accessible on Simply Wall St’s Community page, where millions of investors share their views. By comparing your Narrative’s Fair Value with today’s price, you can quickly decide whether Sable Offshore aligns with your outlook. Narratives also adapt automatically whenever new information comes in, such as company news or fresh earnings reports, so your story stays up to date.

For example, one investor’s Narrative might see Sable Offshore’s intrinsic value at $225 per share, reflecting strong recovery hopes, while another’s could set it as low as $60, based on a more cautious forecast. Narratives let you see these perspectives at a glance, helping you invest with greater confidence and control.

Do you think there's more to the story for Sable Offshore? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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